[ OP-ED COLUMN ]

Lawmakers Balance Debt Vs. Need

Published: Sunday, January 27, 2013 at 2:14 a.m.

Last Modified: Sunday, January 27, 2013 at 2:14 a.m.

If you think of Florida government as a consumer, you can think of the state's ability to issue bonds as its credit card.

The state is at its credit limit as lawmakers head toward their annual session starting in March with pressing needs for new university facilities and public school improvements, which traditionally have relied heavily on bond programs.

Florida has long been a fiscally conservative state. Its critics would say it often favors cheaper solutions over more costly, comprehensive approaches.

In that context, Florida lawmakers have set a goal of not having the state's bond debt exceed its anticipated annual revenue by more than 6 percent, with a cap of 7 percent.

The Great Recession and the subsequent drop in state revenue, coupled with more borrowing to offset that loss, put Florida over the cap, with last year's debt-to-revenue ratio at 7.14 percent. It is projected to drop below the limit to 6.93 percent by the end of this fiscal year, but still well above the 6 percent goal.

A major factor in reducing the state's debt is Gov. Rick Scott, who has made debt reduction one of his priorities and has seen Florida's debt load drop by $2 billion in his first two years in office. Florida has also borrowed a lot less money under Scott's watch.

With that background, Senate Appropriations Chairman Joe Negron, R-Stuart, asked the head of the state Division of Bond Finance last week how much the state could borrow in the coming year if lawmakers wanted to fund new school buildings, environmental land projects or other capital-outlay programs.

"We're over our capacity currently," said Ben Watkins. "Consistent with the policy, there is no debt capacity."

Of course, Florida's debt limit is self-imposed and could be changed by lawmakers. That's not likely given the fiscal policies of Scott and top legislative leaders.

The state has a very good credit rating — AAA by Standard & Poor's — that could be downgraded if the state raised its debt limits. A lower rating would translate into higher costs for borrowing money.

Nonetheless Florida's maxed-out credit card is running right up against some of the state's most critical needs.

One example is school safety. Florida's school-safety program has been cut by 15 percent since 2008. But with the Connecticut shooting, public school officials are looking to the state for money to improve their facilities.

One traditional source for school construction and maintenance has been borrowing through the Public Education Capital Outlay program. But over the past two years, the Legislature has opted not to give the K-12 system any PECO money, instead giving $55 million annually to charter schools, which are public facilities but privately run.

Further complicating the PECO program is the fact that the utilities tax on electric and phone services that supports the program has stagnated.

The PECO problems are also resonating in the State University System, which historically has relied heavily on the bonding program for building construction. The Board of Governors created a task force to review the issue, concluding that the lack of new facilities could jeopardize the university's system's goals to more than double science and technology degrees, and triple graduate-degree production by 2025.

As an alternative to traditional bonding, the universities are asking lawmakers to look at other options, such as raising student fees that could be bonded, allowing more public-private partnerships for building construction and providing general revenue for construction.

"While this is certainly not the sexiest issue, it is an important one," said House budget chair Seth McKeel, R-Lakeland, when his committee reviewed the university system's challenges earlier this month.

WINNER OF THE WEEK

Teachers. With most of Florida's public school teachers not having a substantial pay increase in a number of years, Gov. Rick Scott unveiled a $480 million plan to provide a $2,500 across-the-board boost to classroom teachers. But questions remain as to how the state will pay for costly initiative and how lawmakers will react to it in their upcoming session.

LOSER OF THE WEEK

State pension. The House is advancing a plan that could spell the eventual demise of the Florida pension system, requiring public employees hired after January 2014 to use a 401(k)-type retirement plan rather than the traditional pension.

QUOTE OF THE WEEK

"Now, we need to double down on our investment in education," Gov. Rick Scott said in announcing his $2,500 teacher pay raise.

<p>If you think of Florida government as a consumer, you can think of the state's ability to issue bonds as its credit card.</p><p>The state is at its credit limit as lawmakers head toward their annual session starting in March with pressing needs for new university facilities and public school improvements, which traditionally have relied heavily on bond programs.</p><p>Florida has long been a fiscally conservative state. Its critics would say it often favors cheaper solutions over more costly, comprehensive approaches.</p><p>In that context, Florida lawmakers have set a goal of not having the state's bond debt exceed its anticipated annual revenue by more than 6 percent, with a cap of 7 percent.</p><p>The Great Recession and the subsequent drop in state revenue, coupled with more borrowing to offset that loss, put Florida over the cap, with last year's debt-to-revenue ratio at 7.14 percent. It is projected to drop below the limit to 6.93 percent by the end of this fiscal year, but still well above the 6 percent goal.</p><p>A major factor in reducing the state's debt is Gov. Rick Scott, who has made debt reduction one of his priorities and has seen Florida's debt load drop by $2 billion in his first two years in office. Florida has also borrowed a lot less money under Scott's watch.</p><p>With that background, Senate Appropriations Chairman Joe Negron, R-Stuart, asked the head of the state Division of Bond Finance last week how much the state could borrow in the coming year if lawmakers wanted to fund new school buildings, environmental land projects or other capital-outlay programs.</p><p>"We're over our capacity currently," said Ben Watkins. "Consistent with the policy, there is no debt capacity."</p><p>Of course, Florida's debt limit is self-imposed and could be changed by lawmakers. That's not likely given the fiscal policies of Scott and top legislative leaders.</p><p>The state has a very good credit rating — AAA by Standard & Poor's — that could be downgraded if the state raised its debt limits. A lower rating would translate into higher costs for borrowing money.</p><p>Nonetheless Florida's maxed-out credit card is running right up against some of the state's most critical needs.</p><p>One example is school safety. Florida's school-safety program has been cut by 15 percent since 2008. But with the Connecticut shooting, public school officials are looking to the state for money to improve their facilities.</p><p>One traditional source for school construction and maintenance has been borrowing through the Public Education Capital Outlay program. But over the past two years, the Legislature has opted not to give the K-12 system any PECO money, instead giving $55 million annually to charter schools, which are public facilities but privately run.</p><p>Further complicating the PECO program is the fact that the utilities tax on electric and phone services that supports the program has stagnated.</p><p>The PECO problems are also resonating in the State University System, which historically has relied heavily on the bonding program for building construction. The Board of Governors created a task force to review the issue, concluding that the lack of new facilities could jeopardize the university's system's goals to more than double science and technology degrees, and triple graduate-degree production by 2025.</p><p>As an alternative to traditional bonding, the universities are asking lawmakers to look at other options, such as raising student fees that could be bonded, allowing more public-private partnerships for building construction and providing general revenue for construction.</p><p>"While this is certainly not the sexiest issue, it is an important one," said House budget chair Seth McKeel, R-Lakeland, when his committee reviewed the university system's challenges earlier this month.</p><p>WINNER OF THE WEEK</p><p>Teachers. With most of Florida's public school teachers not having a substantial pay increase in a number of years, Gov. Rick Scott unveiled a $480 million plan to provide a $2,500 across-the-board boost to classroom teachers. But questions remain as to how the state will pay for costly initiative and how lawmakers will react to it in their upcoming session.</p><p>LOSER OF THE WEEK</p><p>State pension. The House is advancing a plan that could spell the eventual demise of the Florida pension system, requiring public employees hired after January 2014 to use a 401(k)-type retirement plan rather than the traditional pension.</p><p>QUOTE OF THE WEEK</p><p>"Now, we need to double down on our investment in education," Gov. Rick Scott said in announcing his $2,500 teacher pay raise.</p>